Ford earns $1.6 billion net in 4Q; average profit-sharing of $8,300

8:19 AM, January 29, 2013

Ford

Detroit Free Press Business Writer

Strong North American profits will net record profit sharing checks of $8,300 on average for 45,800 hourly workers, to be paid March 14.

The news flows from positive fourth-quarter and full-year earnings released today that exceeded Wall Street’s expectations.

Ford reported its highest fourth-quarter pre-tax profit since the same period in 1999 at $1.7 billion or 31 cents per share, beating analyst expectations of 25 cents per share. Net income for the quarter was $1.6 billion despite losses in Europe of $732 million. Revenue was $36.5 billion, up from $34.6 billion a year ago.

And full-year pre-tax profit of $8 billion, driven by $1.9 billion from North America, contributed to Total 2012 net income was $5.7 billion or $1.41 per share, beating the average of analyst estimates of $1.34 per share. A year ago, full-year operating profit was $8.8.

That compares with net income of $20.2 billion in 2011 – the most profitable year since 1998 - but most was driven by an accounting adjustment showing a one-time non-cash gain of $12.4 billion that did not represent real money.

That compares with net income of $20.2 billion in 2011 – the most profitable year since 1998 - but most was driven by an accounting adjustment showing a one-time non-cash gain of $12.4 billion that did not represent real money.

CEO Alan Mulally had warned that Ford would not match 2011 profits or market share in North America and Europe.

North America made more but Europe’s losses were also greater, resulting in pre-tax profit of $8 billion for the year, down from $8.8 billion in 2011.

Company guidance is that North America will see gains in both profit and share in 2013 with stronger pickup demand and a full-year of Escape and Fusion sales. Operating profit should be about 10%, similar to 2012’s 10.4%.

Ford has said it wants to achieve profit margins of 8-10% in North America over the long term and impressed investors in the third quarter with a 12% margin. That fell to 8.4% in the fourth quarter.

North America’s strength will offset bigger losses of about $2 billion projected for Europe this year as the market is expected to hit bottom and is showing signs it is stabilizing.

Bob Shanks, chief financial officer, had warned that Ford would lose more than $1.5 billion in Europe in 2012 and the year ended with a $1.8 billion loss in the region marked by economic upheaval and high unemployment.

Ford has put plans in motion to close three plants by the end of 2014, reduce the headcount by 6,200 and consolidate manufacturing in the region to return to profitability by mid-decade.

South America ended 2012 with $213 million in earnings and is forecast to break even this year with a better product mix tempered by trade and currency issues.

Ford had $39 million in pre-tax profits in Asia-Pacific in the fourth quarter but ended the year with a $77 million loss. The forecast is to break even in 2013 because growth comes with the cost of seven plants under construction and many vehicle launches planned.

The year ahead also will come with higher health care costs, in part due to higher amortization costs. And Ford will address the pension fund which is underfunded by $18.7 billion compared with $15 billion a year ago. Ford plans to contribute $5 billion to the pension fund this year, of which $3.4 billion is discretionary. The pension fund will be fully funded by midd-decade.

Overall, Ford is calling for profits in 2013 to be the same as in 2012. .

Mulally said the Ford team “delivered strong results once again,” and said the company is “well-positioned for another strong year in 2013.”

The resulting profit sharing for workers exceeds the average of $6,200 for 2011 which was paid in two installments.

The street expected Ford to earn $1.53 per share in 2012 and the consensus is the company will earn $1.62 per share for 2013, David Kudla, CEO of Mainstay Capital Management, said in a report.

“Given the strong tailwinds and improving economic environment, we believe these 2013 estimates could prove to be conservative,” Kudla said in a report. “Upward earnings revisions would certainly be a primary factor in continuing the recent rally in Ford’s share price."